Back through the ceiling?

Nearly three years to the day after oil prices first pierced $100 a barrel, they are again threatening to break triple digits on a wave of fund-led optimism, but similarities between 2008 and 2011 end there.

Even the most bullish analysts are quick to recite a litany of reasons why oil will not surge to near $150 again this year. Such a sharp spike would deal the world economy a heavy blow it can ill afford.

The list is long: oil companies are stepping up spending plans before supply reaches a crisis point; resource nationalism has eased; the dollar has firmed; and concerns that oil production is near peaking have subsided.

By far the most compelling reasons, however, are short-term supply fundamentals: there is far more oil in storage, far more fuel capacity at refiners worldwide, and far more idle oil wells that OPEC can reactivate when it chooses, braking the market’s rally in a way it could not three years ago.

Analysts expect an additional eight percent gain in average prices in 2011, according to the latest Reuters poll, although the conditions for a “super-spike” have dissipated.

“To a substantial degree, oil is not like it was then because there are bottlenecks that have been overcome both in refining and production capacity," said Edward Morse, managing director at Credit Suisse.

At the same time consumer nations have since built up crude inventories, with stockpiles from members of the Organisation for Economic Co-operation and Development now at 60 days worth of demand, compared with 53 days in 2008.

Oil demand growth jumped 2.2 million barrels per day (bpd) in 2010, the biggest rise in six years, and forecasts for an addition 1.5 million bpd of use in 2011, according to a Reuters poll.

Although those gains will boost consumption to beyond the previous record high in 2007, supply has risen far more during the recession after a host of multibillion-dollar projects — ones that had been planned during the boom years prior to 2008 — came to fruition.

Members of the Organisation of the Petroleum Exporting Countries currently hold five million to six million bpd of spare oil production capacity to draw on, up to three times the amount the group had at the lowest point in 2008, primarily from top exporter Saudi Arabia. While experts debate at what price — or under what conditions — OPEC would willingly begin pumping more crude, there is little doubt that doing so would douse prices. In 2008, OPEC said it was effectively pumping flat out.

“It is not in the Saudi interest to have a global economic recovery jeopardised by $100-plus oil,” said Jan Stuart, a global oil economist at Macquarie in New York.

“Given the spare capacity, I don’t think you are going to have the same upward spiral that you had in 2008.”

Saudi Oil Minister Ali Al Naimi, OPEC’s most influential member, in December reiterated he preferred prices between $70 and $80 a barrel, below current $89 levels and the 26-month peak near $92 hit earlier in the month.

And while supply from outside the group is set to rise a marginal 400,000 bpd this year, about one-third the rate of 2010, there have been a host of more positive signs of late. In 2008, non-OPEC output actually fell by nearly 400,000 bpd.